How Competitive Is the Health Insurance Market?

Most people don’t have much say over which health insurance plan they get, and the big health care bills introduced in Congress this year wouldn’t do much to change that, columnist David Leonhardt argues in this morning’s New York Times.

The controversial public option — a new, government backed health plan — would be an option only for a minority of Americans. Most people who get coverage at work would still be covered at work under the health reform bills, according to the Congressional Budget Office.

And while it’s true that employers have some choice when they pick their company plan, that choice can be limited in many states dominated by one or two insurers, the Associated Press recently pointed out.

For example, a 2007 report from the American Medical Association found that WellPoint accounted for 78 percent of the Maine market, and Aetna had a 10% share.

“There is a serious problem with the lack of competition among insurers,” Sen. Olympia Snowe, a Maine Republican, told the AP. “The impact on the consumer is significant.”

Insurers say figures like that still leave room for choice. “You can have a very competitive market and still have companies with a high market share,” a lobbyist for the Blue Cross Blue Shield Association told the AP.

Leonhardt notes that a bill backed by Sen. Ron Wyden, an Oregon Dem, and co-sponsored by a handful of Senators from both parties, would provide significantly more choice by allowing Americans who now get their insurance at work to shop for their own plan on an insurance exchange. That shift would also give people a clearer picture of health care costs, which are now largely borne by employers and often hidden from employees.

But support for employer-based health insurance remains strong in Congress, and Wyden’s bill hasn’t gotten much traction.

Insurance Bonus: The Health Blog talked health insurance with Wyden last year. Here’s the post from that conversation.

Comments (5 of 43)

Many Americans have to give up thier dream and taking thier job they dont like in order keeping thier health insurance.
If people dont have to worry about health insurance ,who knows many millionares would be created ,how many jobs would be created too .
One very good example of my sister ,she loves painting and want to be artist but she have to work for some company she does not like for health insurance.
I my self really want to create own business but dont want to risk losing my health insurance .
Health care reform now if you want moving economy.

1:09 pm August 28, 2009

war horse wrote :

To Robert: Your analogy about "trading dollars" misses an important point. An insured person definitely pays money out, but does not control how much comes back to him or her. An insurance company definitely takes money in, and also controls how much goes back out.

10:42 am August 28, 2009

Robert wrote :

To Physician Competition: Every industry must comply with certain "standards of practice", government regulations, legal precedents, industry standards, quality benchmarks etc. Medicine is no different. If I am a doctor, why wouldn't I want to figure out a way to take control of the quality and pricing of the services I provide? I certainly must be confident enough to know that I can provide those services at a higher level of quality and deliver more value to patients than other physicians. If I can't, I should choose other services on which I can compete. I would make certain that I let my patient market know that I performed these services better and/or less expensively than other physicians. The problem is that the dollars involved in healthcare are so large that everyone wants to get into the act. If physicians permit others to do so, the physician loses control of his profession/business, and the physician's quality of business life suffers. This is not difficult stuff - you just have to think out of the box! Follow the example of the physicians who have established concierge type practices over which they have control. Why not charge what you are worth and what the market will bear rather than accepting someone else's pricing, who is motivated to offer the lowest price they can. Patients needing your services will find you and a way to pay - we are all good in finding ways to manage our self interests and our lives.

10:24 am August 28, 2009

Robert wrote :

Insurance of any kind is simply a funding mechanism that enables individual insureds to fund unknown future costs by spreading the risk of incurring these costs among others having a similar risk. The insurance company takes the ultimate responsibility for funding all the insured risks, regardless of whether the actual costs turn out to be more or less than the actual premium they collect. This risk is significant and insurance companies profit (or lose) depending on how well they choose and price the risk. Understand that in insurance, unlike any other industry, the "cost of goods sold" becomes known after the product is sold. There is really no need to purchase insurance if a company or individual has sufficient funds (capital or savings) to cover their own risk. In fact, in all cases the less insurance you purchase and the more risk you self insure, the lower the cost of financing your risk. You, in effect, are simply trading dollars with the insurance company. You give the insurance company a dollar and the insurer returns a benefit that is less than a dollar, in the case of health insurance, about 80 cents. So, it follows that the more risk you finance yourself, the less dollars you trade and more of your dollar goes to funding your costs. In healthcare the higher your deductible, coinsurance, out of pocket and copays (self-insurance), the less dollars you will trade, and your healthcare costs will be lower. With healthcare, your catastrophic risk is significant and you should direct your dollars at insuring your risk at a high dollar level. The Obama administration's proposals all reduce the amount of the risk you fund yourself, increase the number of dollars you trade, and increase your (and everyone else's) total costs. And, trading tax dollars for health benefits from the government is far more ineffecient that trading dollars with insurance companies. It only makes sense that your health and your healthcare costs must be your own responsibility, and there should be some societal mechanism to assist you only if you are a productive citizen who simply does not have enough money to fund your own risk. This should be the exception rather than the rule. How can anyone possibly think of delegating the responsibility for maintaining your own health (life) to anyone, especially an insurance company or the government. I can, however, understand why a government would want to take control of your health and life, and whenever that happens, no good can come of it.

10:01 am August 28, 2009

Physician competition wrote :

Physician's actions are governed by what is called the "standard of practice." A doctor might think "laughter therapy" is good for something, but if he prescribes it he will be outside the standard of practice and will be easily liable for lawsuit or losing his license. The practice of medicine is one of the most regimented of all endeavors. Before an innovation can be used in physician's practice it has to at least be studied and reported as useful by other physicians, at least at a conference, or preferably published or FDA approved. This fact may limit innovation but it is still a fact. Price competition does occur but is hidden and probably shouldn't be: every insurer has (different)specific rates it pays for every clinical action. Doctors have to agree to those rates to be on the panel; the busier the doctor the less likely to take lower rates.